Edgar Filing: EXELON CORP

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number	Name of Registrant; State of Incorporation; Address of Principal Executive Offices; and Telephone Number	IRS Employer Identification Number

1-16169	EXELON CORPORATION		23-2990190
	(a Pennsylvania corporation) 10 South Dearborn Street P.O. Box 805379 Chicago, Illinois 60680-5379 (312) 394-7398

333-85496	EXELON GENERATION COMPANY, LLC		23-3064219
	(a Pennsylvania limited liability company) 300 Exelon Way Kennett Square, Pennsylvania 19348-2473 (610) 765-5959

1-1839	COMMONWEALTH EDISON COMPANY		36-0938600
	(an Illinois corporation) 440 South LaSalle Street Chicago, Illinois 60605-1028 (312) 394-4321

000-16844	PECO ENERGY COMPANY		23-0970240
	(a Pennsylvania corporation) P.O. Box 8699 2301 Market Street Philadelphia, Pennsylvania 19101-8699 (215) 841-4000

1-1910	BALTIMORE GAS AND ELECTRIC COMPANY		52-0280210
	(a Maryland corporation) 2 Center Plaza 110 West Fayette Street Baltimore, Maryland 21201-3708 (410) 234-5000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company
Exelon Corporation	x
Exelon Generation Company, LLC			x
Commonwealth Edison Company			x
PECO Energy Company			x
Baltimore Gas and Electric Company			x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The number of shares outstanding of each registrant’s common stock as of June 30, 2014 was:


Exelon Corporation Common Stock, without par value		859,197,443
Exelon Generation Company, LLC		not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,016,914
PECO Energy Company Common Stock, without par value		170,478,507
Baltimore Gas and Electric Company Common Stock, without par value		1,000

TABLE OF CONTENTS


		Page No.

FILING FORMAT			7

FORWARD-LOOKING STATEMENTS			7

WHERE TO FIND MORE INFORMATION			7

PART I.	FINANCIAL INFORMATION		8

ITEM 1.	FINANCIAL STATEMENTS		8

	Exelon Corporation

	Consolidated Statements of Operations and Comprehensive Income		9

	Consolidated Statements of Cash Flows		10

	Consolidated Balance Sheets		11

	Consolidated Statement of Changes in Shareholders’ Equity		13

	Exelon Generation Company, LLC

	Consolidated Statements of Operations and Comprehensive Income		14

	Consolidated Statements of Cash Flows		15

	Consolidated Balance Sheets		16

	Consolidated Statement of Changes in Equity		18

	Commonwealth Edison Company

	Consolidated Statements of Operations and Comprehensive Income		19

	Consolidated Statements of Cash Flows		20

	Consolidated Balance Sheets		21

	Consolidated Statement of Changes in Shareholders’ Equity		23

	PECO Energy Company

	Consolidated Statements of Operations and Comprehensive Income		24

	Consolidated Statements of Cash Flows		25

	Consolidated Balance Sheets		26

	Consolidated Statement of Changes in Shareholders’ Equity		28

	Baltimore Gas and Electric Company

	Consolidated Statements of Operations and Comprehensive Income		29

	Consolidated Statements of Cash Flows		30

	Consolidated Balance Sheets		31

	Consolidated Statement of Changes in Shareholders’ Equity		33

	Combined Notes to Consolidated Financial Statements		34

	1. Basis of Presentation		34

	2. New Accounting Pronouncements		35

	3. Variable Interest Entities		35

	4. Mergers, Acquisitions, and Dispositions		41

	5. Regulatory Matters		42

	6. Investment in Constellation Energy Nuclear Group, LLC		57

	7. Impairment of Long-Lived Assets		61

	8. Fair Value of Financial Assets and Liabilities		63


		Page No.

	9. Derivative Financial Instruments		86

	10. Debt and Credit Agreements		102

	11. Income Taxes		107

	12. Nuclear Decommissioning		110

	13. Retirement Benefits		114

	14. Severance		118

	15. Changes in Accumulated Other Comprehensive Income		120

	16. Common Stock		124

	17. Earnings Per Share and Equity		125

	18. Commitments and Contingencies		126

	19. Supplemental Financial Information		143

	20. Segment Information		149

	21. Subsequent Events		154

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		155

	Exelon Corporation		155

	General		155

	Executive Overview		156

	Critical Accounting Policies and Estimates		175

	Results of Operations		176

	Liquidity and Capital Resources		204

	Contractual Obligations and Off-Balance Sheet Arrangements		215

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		216

ITEM 4.	CONTROLS AND PROCEDURES		224

PART II.	OTHER INFORMATION		226

ITEM 1.	LEGAL PROCEEDINGS		226

ITEM 1A.	RISK FACTORS		226

ITEM 4.	MINE SAFETY DISCLOSURES		230

ITEM 6.	EXHIBITS		230

SIGNATURES			233

	Exelon Corporation		233

	Exelon Generation Company, LLC		233

	Commonwealth Edison Company		234

	PECO Energy Company		234

	Baltimore Gas and Electric Company		234

CERTIFICATION EXHIBITS			232

	Exelon Corporation		235, 245

	Exelon Generation Company, LLC		237, 247

	Commonwealth Edison Company		239, 249

	PECO Energy Company		241, 251

	Baltimore Gas and Electric Company		243, 253

GLOSSARY OF TERMS AND ABBREVIATIONS


Exelon Corporation and Related Entities
Exelon		Exelon Corporation
Generation		Exelon Generation Company, LLC
ComEd		Commonwealth Edison Company
PECO		PECO Energy Company
BGE		Baltimore Gas and Electric Company
BSC		Exelon Business Services Company, LLC
Exelon Corporate		Exelon in its corporate capacity as a holding company
CENG		Constellation Energy Nuclear Group, LLC
Constellation		Constellation Energy Group, Inc.
Antelope Valley		Antelope Valley Solar Ranch One
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
Ventures		Exelon Ventures Company, LLC
AmerGen		AmerGen Energy Company, LLC
BondCo		RSB BondCo LLC
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
PETT		PECO Energy Transition Trust
Registrants		Exelon, Generation, ComEd, PECO and BGE, collectively

Other Terms and Abbreviations
Note “—” of the Exelon 2013 Form 10-K		Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2013 Annual Report on Form 10-K
1998 restructuring settlement		PECO’s 1998 settlement of its restructuring case mandated by the Competition Act
Act 11		Pennsylvania Act 11 of 2012
Act 129		Pennsylvania Act 129 of 2008
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AEPS		Pennsylvania Alternative Energy Portfolio Standards
AEPS Act		Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended
AESO		Alberta Electric Systems Operator
AFUDC		Allowance for Funds Used During Construction
ALJ		Administrative Law Judge
AMI		Advanced Metering Infrastructure
AMP		Advanced Metering Program
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Title IV Acid Rain Program
ARRA of 2009		American Recovery and Reinvestment Act of 2009
Block contracts		Forward Purchase Energy Block Contracts
CAIR		Clean Air Interstate Rule
CAISO		California ISO
CAMR		Federal Clean Air Mercury Rule
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CFL		Compact Fluorescent Light

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Competition Act		Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996
CPI		Consumer Price Index
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CTC		Competitive Transition Charge
D.C. Circuit Court		United States Court of Appeals for the District of Columbia Circuit
DOE		United States Department of Energy
DOJ		United States Department of Justice
DSP		Default Service Provider
DSP Program		Default Service Provider Program
EDF		Electricite de France SA
EE&C		Energy Efficiency and Conservation/Demand Response
EGS		Electric Generation Supplier
EIMA		Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
ERISA		Employee Retirement Income Security Act of 1974, as amended
EROA		Expected Rate of Return on Assets
ESPP		Employee Stock Purchase Plan
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FRCC		Florida Reliability Coordinating Council
FTC		Federal Trade Commission
GAAP		Generally Accepted Accounting Principles in the United States
GHG		Greenhouse Gas
GRT		Gross Receipts Tax
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
HAP		Hazardous air pollutants
Health Care Reform Acts		Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010
IBEW		International Brotherhood of Electrical Workers
ICC		Illinois Commerce Commission
ICE		Intercontinental Exchange
Illinois Act		Illinois Electric Service Customer Choice and Rate Relief Law of 1997
Illinois EPA		Illinois Environmental Protection Agency
Illinois Settlement Legislation		Legislation enacted in 2007 affecting electric utilities in Illinois
IPA		Illinois Power Agency
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		ISO New England Inc.
ISO-NY		ISO New York
kV		Kilovolt
kW		Kilowatt

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LILO		Lease-In, Lease-Out
LLRW		Low-Level Radioactive Waste
LTIP		Long-Term Incentive Plan
MATS		U.S. EPA Mercury and Air Toxics Rule
MBR		Market Based Rates Incentive
MDE		Maryland Department of the Environment
MDPSC		Maryland Public Service Commission
MGP		Manufactured Gas Plant
MISO		Midcontinent Independent System Operator, Inc.
mmcf		Million Cubic Feet
Moody’s		Moody’s Investor Service
MOPR		Minimum Offer Price Rule
MRV		Market-Related Value
MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
n.m.		not meaningful
NAV		Net Asset Value
NDT		Nuclear Decommissioning Trust
NEIL		Nuclear Electric Insurance Limited
NERC		North American Electric Reliability Corporation
NGS		Natural Gas Supplier
NJDEP		New Jersey Department of Environmental Protection
Non-Regulatory Agreements Units		Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting
NOV		Notice of Violation
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
OPEB		Other Postretirement Employee Benefits
PA DEP		Pennsylvania Department of Environmental Protection
PAPUC		Pennsylvania Public Utility Commission
PGC		Purchased Gas Cost Clause
PHI		Pepco Holdings, Inc.
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement
Price-Anderson Act		Price-Anderson Nuclear Industries Indemnity Act of 1957
PRP		Potentially Responsible Parties
PSEG		Public Service Enterprise Group Incorporated
PURTA		Pennsylvania Public Realty Tax Act

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
PV		Photovoltaic
RCRA		Resource Conservation and Recovery Act of 1976, as amended
REC		Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source
Regulatory Agreement Units		Nuclear generating units whose decommissioning-related activities are subject to contractual elimination under regulatory accounting
RES		Retail Electric Suppliers
RFP		Request for Proposal
Rider		Reconcilable Surcharge Recovery Mechanism
RGGI		Regional Greenhouse Gas Initiative
RMC		Risk Management Committee
RPM		PJM Reliability Pricing Model
RPS		Renewable Energy Portfolio Standards
RTEP		Regional Transmission Expansion Plan
RTO		Regional Transmission Organization
S&P		Standard & Poor’s Ratings Services
SEC		United States Securities and Exchange Commission
Senate Bill 1		Maryland Senate Bill 1
SERC		SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SERP		Supplemental Employee Retirement Plan
SGIG		Smart Grid Investment Grant
SGIP		Smart Grid Initiative Program
SILO		Sale-In, Lease-Out
SMPIP		Smart Meter Procurement and Installation Plan
SNF		Spent Nuclear Fuel
SOS		Standard Offer Service
SPP		Southwest Power Pool
Tax Relief Act of 2010		Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
Upstream		Natural gas exploration and production activities
VIE		Variable Interest Entity
WECC		Western Electric Coordinating Council

FILING FORMAT

This combined Form 10-Q is being filed separately by the Registrants. Information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf. No Registrant makes any representation as to information relating to any other Registrant.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2013 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 22; (2) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

The public may read and copy any reports or other information that the Registrants file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents are also available to the public from commercial document retrieval services, the website maintained by the SEC at www.sec.gov and the Registrants’ websites at www.exeloncorp.com. Information contained on the Registrants’ websites shall not be deemed incorporated into, or to be a part of, this Report.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except per share data)	2014			2013			2014			2013
Operating revenues	$	6,024		$	6,141		$	13,261		$	12,223
Operating expenses
Purchased power and fuel		2,346			2,132			6,352			4,795
Purchased power and fuel from affiliates		66			287			400			605
Operating and maintenance		2,166			1,892			4,024			3,656
Depreciation and amortization		590			533			1,154			1,076
Taxes other than income		288			271			580			548

Total operating expenses		5,456			5,115			12,510			10,680

Equity in losses of unconsolidated affiliates		—			(21	)		(20	)		(30	)
Gain on consolidation of CENG		261			—			261			—

Operating income		829			1,005			992			1,513

Other income and (deductions)
Interest expense		(228	)		(246	)		(445	)		(863	)
Interest expense to affiliates, net		(10	)		(6	)		(20	)		(13	)
Other, net		243			(17	)		348			155

Total other income and (deductions)		5			(269	)		(117	)		(721	)

Income before income taxes		834			736			875			792
Income taxes		277			239			224			294

Net income		557			497			651			498
Net income attributable to non-controlling interests, preferred security dividends and redemption and preference stock dividends		35			7			39			12

Net income attributable to common shareholders		522			490			612			486

Comprehensive income, net of income taxes
Net income		557			497			651			498
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service benefit reclassified to periodic benefit cost		(6	)		—			(6	)		1
Actuarial loss reclassified to periodic cost		38			50			72			100
Pension and non-pension postretirement benefit plans valuation adjustment		258			2			246			77
Deferred compensation unit valuation adjustment		—			10			—			10
Unrealized loss on cash flow hedges		(48	)		(65	)		(73	)		(123	)
Unrealized gain on equity investments		—			8			11			36
Unrealized gain (loss) on foreign currency translation		4			(5	)		(1	)		(6	)
Unrealized gain (loss) on marketable securities		1			—			1			(1	)
Reversal of CENG equity method AOCI		(116	)		—			(116	)		—

Other comprehensive income		131			—			134			94

Comprehensive income	$	688		$	497		$	785		$	592

Average shares of common stock outstanding:
Basic		860			856			860			856
Diluted		864			860			863			859

Earnings per average common share:
Basic	$	0.61		$	0.57		$	0.71		$	0.57
Diluted	$	0.60		$	0.57		$	0.71		$	0.57

Dividends per common share	$	0.31		$	0.31		$	0.62		$	0.84

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2014			2013
Cash flows from operating activities
Net income	$	651		$	498
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		1,925			1,972
Gain on consolidation of CENG		(268	)		—
Deferred income taxes and amortization of investment tax credits		133			(468	)
Net fair value changes related to derivatives		751			(28	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(168	)		(27	)
Other non-cash operating activities		567			576
Changes in assets and liabilities:
Accounts receivable		48			131
Inventories		(150	)		(18	)
Accounts payable, accrued expenses and other current liabilities		(358	)		(583	)
Option premiums received (paid), net		21			(10	)
Counterparty collateral posted, net		(606	)		(259	)
Income taxes		(16	)		705
Pension and non-pension postretirement benefit contributions		(499	)		(284	)
Other assets and liabilities		(280	)		133

Net cash flows provided by operating activities		1,751			2,338

Cash flows from investing activities
Capital expenditures		(2,501	)		(2,518	)
Proceeds from termination of direct financing lease investment		335			—
Proceeds from nuclear decommissioning trust fund sales		4,219			1,448
Investment in nuclear decommissioning trust funds		(4,238	)		(1,565	)
Acquisition of business		(66	)		(3	)
Proceeds from sale of long-lived assets		32			4
Cash consolidated from CENG		129			—
Change in restricted cash		(40	)		22
Other investing activities		(57	)		63

Net cash flows used in investing activities		(2,187	)		(2,549	)

Cash flows from financing activities
Changes in short-term borrowings		293			662
Issuance of long-term debt		2,100			509
Retirement of long-term debt		(1,191	)		(616	)
Redemption of preferred securities		—			(93	)
Distributions to non-controlling interest of consolidated VIE		(415	)		—
Dividends paid on common stock		(533	)		(716	)
Proceeds from employee stock plans		18			32
Other financing activities		(83	)		(62	)

Net cash flows provided by (used in) financing activities		189			(284	)

Decrease in cash and cash equivalents		(247	)		(495	)
Cash and cash equivalents at beginning of period		1,609			1,486

Cash and cash equivalents at end of period	$	1,362		$	991

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,362	$	1,609
Restricted cash and investments		207		167
Accounts receivable, net
Customer		2,973		2,981
Other		1,005		1,175
Mark-to-market derivative assets		629		727
Unamortized energy contract assets		264		374
Inventories, net
Fossil fuel		409		276
Materials and supplies		1,041		829
Deferred income taxes		426		573
Regulatory assets		732		760
Other		775		666

Total current assets		9,823		10,137

Property, plant and equipment, net		51,747		47,330
Deferred debits and other assets
Regulatory assets		5,545		5,910
Nuclear decommissioning trust funds		10,437		8,071
Investments		839		1,165
Investments in affiliates		22		22
Investment in CENG		—		1,925
Goodwill		2,674		2,625
Mark-to-market derivative assets		482		607
Unamortized energy contracts assets		593		710
Pledged assets for Zion Station decommissioning		402		458
Other		1,092		964

Total deferred debits and other assets		22,086		22,457

Total assets^(a)	$	83,656	$	79,924

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014			December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	621		$	341
Long-term debt due within one year		2,047			1,509
Accounts payable		2,633			2,484
Accrued expenses		1,382			1,633
Payables to affiliates		38			116
Deferred income taxes		17			40
Regulatory liabilities		368			327
Mark-to-market derivative liabilities		228			159
Unamortized energy contract liabilities		239			261
Other		994			858

Total current liabilities		8,567			7,728

Long-term debt		18,133			17,623
Long-term debt to financing trusts		648			648
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		13,192			12,905
Asset retirement obligations		7,054			5,194
Pension obligations		1,804			1,876
Non-pension postretirement benefit obligations		1,419			2,190
Spent nuclear fuel obligation		1,021			1,021
Regulatory liabilities		4,670			4,388
Mark-to-market derivative liabilities		262			300
Unamortized energy contract liabilities		260			266
Payable for Zion Station decommissioning		264			305
Other		2,133			2,540

Total deferred credits and other liabilities		32,079			30,985

Total liabilities^(a)		59,427			56,984

Commitments and contingencies
Shareholders’ equity
Common stock (No par value, 2,000 shares authorized, 894 shares and 857 shares outstanding at June 30, 2014 and December 31, 2013, respectively)		16,651			16,741
Treasury stock, at cost (35 shares at June 30, 2014 and December 31, 2013, respectively)		(2,327	)		(2,327	)
Retained earnings		10,435			10,358
Accumulated other comprehensive loss, net		(1,906	)		(2,040	)

Total shareholders’ equity		22,853			22,732
BGE preference stock not subject to mandatory redemption		193			193
Noncontrolling interest		1,183			15

Total equity		24,229			22,940

Total liabilities and shareholders’ equity	$	83,656		$	79,924

(a)

Exelon’s consolidated assets include $7,765 million and $1,755 million at June 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $3,111 million and $658 million at June 30, 2014 and December 31, 2013, respectively, of certain VIEs for which the VIE creditors do not have recourse to Exelon. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions, shares in thousands)	Issued Shares		Common Stock			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss, net			Non-controlling Interest			Preferred and Preference Stock			Total Equity
Balance, December 31, 2013		892,034	$	16,741		$	(2,327	)	$	10,358		$	(2,040	)	$	15		$	193		$	22,940
Net income		—		—			—			612			—			33			6			651
Long-term incentive plan activity		1,408		32			—						—						—			32
Employee stock purchase plan issuances		499		14			—			—			—			—			—			14
Allocation of tax benefit from member		—		(5	)																	(5	)
Acquisition of non-controlling interest		—		—			—			—			—			2			—			2
Common stock dividends		—		—			—			(535	)		—			—			—			(535	)
Preferred and preference stock dividends		—		—			—			—			—			—			(6	)		(6	)
Fair value of financing contract payments		—		(131	)		—			—			—			—			—			(131	)
Non-controlling interest established upon consolidation of CENG		—		—			—			—			—			1,548			—			1,548
Consolidated VIE dividend to non-controlling interest		—		—			—			—			—			(415	)		—			(415	)
Reversal of CENG equity method AOCI, net of income taxes of $77		—		—			—			—			(116	)		—			—			(116	)
Other comprehensive income, net of income taxes of $(159)		—		—			—			—			250			—			—			250

Balance, June 30, 2014		893,941	$	16,651		$	(2,327	)	$	10,435		$	(1,906	)	$	1,183		$	193		$	24,229

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	3,588		$	3,718		$	7,644		$	6,859
Operating revenues from affiliates		201			352			535			744

Total operating revenues		3,789			4,070			8,179			7,603

Operating expenses
Purchased power and fuel		1,766			1,656			4,774			3,503
Purchased power and fuel from affiliates		69			290			417			611
Operating and maintenance		1,255			1,041			2,194			2,007
Operating and maintenance from affiliates		158			148			305			295
Depreciation and amortization		254			210			466			424
Taxes other than income		118			101			223			194

Total operating expenses		3,620			3,446			8,379			7,034

Equity in losses of unconsolidated affiliates		(1	)		(21	)		(20	)		(30	)
Gain on consolidation of CENG		261			—			261			—

Operating income		429			603			41			539

Other income and (deductions)
Interest expense		(74	)		(77	)		(147	)		(142	)
Interest expense to affiliates, net		(12	)		(16	)		(25	)		(34	)
Other, net		228			(33	)		318			95

Total other income and (deductions)		142			(126	)		146			(81	)

Income before income taxes		571			477			187			458
Income taxes (benefit)		199			149			(1	)		148

Net income		372			328			188			310
Net income (loss) attributable to noncontrolling interests		32			(2	)		33			(1	)

Net income attributable to membership interest		340			330			155			311

Comprehensive income, net of income taxes
Net income		372			328			188			310
Other comprehensive income (loss), net of income taxes
Unrealized loss on cash flow hedges		(45	)		(137	)		(70	)		(267	)
Unrealized gain on equity investments		—			8			11			36
Unrealized gain (loss) on foreign currency translation		4			(5	)		(1	)		(6	)
Unrealized gain (loss) on marketable securities		2			—			(1	)		(1	)
Reversal of CENG equity method AOCI		(116	)		—			(116	)		—

Other comprehensive loss		(155	)		(134	)		(177	)		(238	)

Comprehensive income	$	217		$	194		$	11		$	72

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2014			2013
Cash flows from operating activities
Net income	$	188		$	310
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		1,242			1,358
Gain on consolidation of CENG		(268	)		—
Deferred income taxes and amortization of investment tax credits		(15	)		(44	)
Net fair value changes related to derivatives		760			(21	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(168	)		(27	)
Other non-cash operating activities		209			315
Changes in assets and liabilities:
Accounts receivable		63			88
Receivables from and payables to affiliates, net		(20	)		(29	)
Inventories		(170	)		(38	)
Accounts payable, accrued expenses and other current liabilities		(273	)		(426	)
Option premiums received (paid), net		21			(10	)
Counterparty collateral paid, net		(633	)		(303	)
Income taxes		72			265
Pension and non-pension postretirement benefit contributions		(210	)		(120	)
Other assets and liabilities		(56	)		(168	)

Net cash flows provided by operating activities		742			1,150

Cash flows from investing activities
Capital expenditures		(1,103	)		(1,277	)
Proceeds from nuclear decommissioning trust fund sales		4,219			1,448
Investment in nuclear decommissioning trust funds		(4,238	)		(1,565	)
Acquisition of business		(66	)		—
Proceeds from sale of long-lived assets		32			—
Change in restricted cash		(17	)		(11	)
Changes in Exelon intercompany money pool		44			—
Cash consolidated from CENG		129			—
Other investing activities		(14	)		27

Net cash flows used in investing activities		(1,014	)		(1,378	)

Cash flows from financing activities
Change in short-term borrowings		46			288
Issuance of long-term debt		300			209
Retirement of long-term debt		(538	)		(458	)
Changes in Exelon intercompany money pool		190			263
Distribution to member		(235	)		(474	)
Distributions to non-controlling interest of consolidated VIE		(415	)		—
Other financing activities		(29	)		(49	)

Net cash flows used in financing activities		(681	)		(221	)

Decrease in cash and cash equivalents		(953	)		(449	)
Cash and cash equivalents at beginning of period		1,258			671

Cash and cash equivalents at end of period	$	305		$	222

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	305	$	1,258
Restricted cash and cash equivalents		88		71
Accounts receivable, net
Customer		1,733		1,689
Other		441		353
Mark-to-market derivative assets		629		727
Receivables from affiliates		67		108
Receivable from Exelon intercompany pool		—		44
Unamortized energy contract assets		264		374
Inventories, net
Fossil fuel		328		164
Materials and supplies		872		671
Deferred income taxes		476		475
Other		524		505

Total current assets		5,727		6,439

Property, plant and equipment, net		23,743		20,111
Deferred debits and other assets
Nuclear decommissioning trust funds		10,437		8,071
Investments		432		400
Investment in CENG		—		1,925
Goodwill, net		49		—
Mark-to-market derivative assets		464		600
Prepaid pension asset		1,888		1,873
Pledged assets for Zion Station decommissioning		402		458
Unamortized energy contract assets		593		710
Other		687		645

Total deferred debits and other assets		14,952		14,682

Total assets^(a)	$	44,422	$	41,232

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	53	$	22
Long-term debt due within one year		52		561
Long-term debt to affiliates due within one year		563		—
Accounts payable		1,508		1,322
Accrued expenses		819		976
Payables to affiliates		108		181
Borrowings from Exelon intercompany money pool		190		—
Deferred income taxes		1		25
Mark-to-market derivative liabilities		215		142
Unamortized energy contract liabilities		233		249
Other		473		389

Total current liabilities		4,215		3,867

Long-term debt		5,944		5,645
Long-term debt to affiliate		948		1,523
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		6,334		6,295
Asset retirement obligations		6,907		5,047
Pension obligations		125		—
Non-pension postretirement benefit obligations		941		850
Spent nuclear fuel obligation		1,021		1,021
Payables to affiliates		2,917		2,740
Mark-to-market derivative liabilities		135		120
Unamortized energy contract liabilities		260		266
Payable for Zion Station decommissioning		264		305
Other		761		811

Total deferred credits and other liabilities		19,665		17,455

Total liabilities^(a)		30,772		28,490

Commitments and contingencies
Equity
Member’s equity
Membership interest		8,895		8,898
Undistributed earnings		3,533		3,613
Accumulated other comprehensive income, net		37		214

Total member’s equity		12,465		12,725
Noncontrolling interest		1,185		17

Total equity		13,650		12,742

Total liabilities and equity	$	44,422	$	41,232

(a)

Generation’s consolidated assets include $7,711 million and $1,695 million at June 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $2,855 million and $362 million at June 30, 2014 and December 31, 2013, respectively, of certain VIEs for which the VIE creditors do not have recourse to Generation. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


	Member’s Equity
(In millions)	Membership Interest			Undistributed Earnings			Accumulated Other Comprehensive Income, net			Non-controlling Interest			Total Equity
Balance, December 31, 2013	$	8,898		$	3,613		$	214		$	17		$	12,742
Net income		—			155			—			33			188
Acquisition of non-controlling interest		—			—			—			2			2
Allocation of tax benefit from member		(3	)		—			—			—			(3	)
Distribution to member		—			(235	)		—			—			(235	)
Non-controlling interest established upon consolidation of CENG		—			—			—			1,548			1,548
Consolidated VIE dividend to non-controlling interest		—			—			—			(415	)		(415	)
Reversal of CENG equity method AOCI, net of income taxes of $77		—			—			(116	)		—			(116	)
Other comprehensive loss, net of income taxes of $35		—			—			(61	)		—			(61	)

Balance, June 30, 2014	$	8,895		$	3,533		$	37		$	1,185		$	13,650

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	1,128		$	1,080		$	2,261		$	2,238
Operating revenues from affiliates		—			—			1			1

Total operating revenues		1,128			1,080			2,262			2,239

Operating expenses
Purchased power		204			127			416			364
Purchased power from affiliate		65			121			173			266
Operating and maintenance		316			319			603			611
Operating and maintenance from affiliate		39			40			78			76
Depreciation and amortization		174			170			347			337
Taxes other than income		72			71			149			145

Total operating expenses		870			848			1,766			1,799

Operating income		258			232			496			440

Other income and (deductions)
Interest expense		(76	)		(72	)		(153	)		(422	)
Interest expense to affiliates, net		(4	)		(4	)		(7	)		(7	)
Other, net		5			6			10			11

Total other income and (deductions)		(75	)		(70	)		(150	)		(418	)

Income before income taxes		183			162			346			22
Income taxes		72			66			137			8

Net income		111			96			209			14

Comprehensive income	$	111		$	96		$	209		$	14

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2014			2013
Cash flows from operating activities
Net income	$	209		$	14
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		347			337
Deferred income taxes and amortization of investment tax credits		63			(226	)
Other non-cash operating activities		99			39
Changes in assets and liabilities:
Accounts receivable		(83	)		18
Receivables from and payables to affiliates, net		(46	)		(26	)
Inventories		(4	)		(11	)
Accounts payable, accrued expenses and other current liabilities		27			20
Income taxes		5			240
Pension and non-pension postretirement benefit contributions		(236	)		(119	)
Other assets and liabilities		48			217

Net cash flows provided by operating activities		429			503

Cash flows from investing activities
Capital expenditures		(747	)		(711	)
Proceeds from sales of investments		7			4
Purchases of investments		(3	)		(3	)
Change in restricted cash		(2	)		(3	)
Other investing activities		14			20

Net cash flows used in investing activities		(731	)		(693	)

Cash flows from financing activities
Changes in short-term borrowings		314			374
Issuance of long-term debt		650			—
Retirement of long-term debt		(617	)		(125	)
Contributions from parent		112			—
Dividends paid on common stock		(153	)		(110	)
Other financing activities		(2	)		—

Net cash flows provided by financing activities		304			139

Increase (Decrease) in cash and cash equivalents		2			(51	)
Cash and cash equivalents at beginning of period		36			144

Cash and cash equivalents at end of period	$	38		$	93

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	38	$	36
Restricted cash		4		2
Accounts receivable, net
Customer		516		451
Other		428		584
Inventories, net		112		109
Regulatory assets		304		329
Other		32		29

Total current assets		1,434		1,540

Property, plant and equipment, net		15,121		14,666
Deferred debits and other assets
Regulatory assets		850		933
Investments		1		5
Investments in affiliates		6		6
Goodwill		2,625		2,625
Receivables from affiliates		2,606		2,469
Prepaid pension asset		1,626		1,583
Other		275		291

Total deferred debits and other assets		7,989		7,912

Total assets	$	24,544	$	24,118

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	498	$	184
Long-term debt due within one year		260		617
Accounts payable		505		449
Accrued expenses		274		307
Payables to affiliates		37		83
Customer deposits		130		133
Regulatory liabilities		164		170
Deferred income taxes		117		16
Mark-to-market derivative liability		13		17
Other		82		72

Total current liabilities		2,080		2,048

Long-term debt		5,448		5,058
Long-term debt to financing trust		206		206
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		4,080		4,116
Asset retirement obligations		100		99
Non-pension postretirement benefits obligations		284		381
Regulatory liabilities		3,686		3,512
Mark-to-market derivative liability		121		176
Other		841		994

Total deferred credits and other liabilities		9,112		9,278

Total liabilities		16,846		16,590

Commitments and contingencies
Shareholders’ equity
Common stock		1,588		1,588
Other paid-in capital		5,304		5,190
Retained earnings		806		750

Total shareholders’ equity		7,698		7,528

Total liabilities and shareholders’ equity	$	24,544	$	24,118

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Other Paid- In Capital		Retained Deficit Unappropriated			Retained Earnings Appropriated			Total Shareholders’ Equity
Balance, December 31, 2013	$	1,588	$	5,190	$	(1,639	)	$	2,389		$	7,528
Net income		—		—		209			—			209
Appropriation of retained earnings for future dividends		—		—		(209	)		209			—
Common stock dividends		—		—		—			(153	)		(153	)
Contribution from parent		—		112		—			—			112
Parent tax matter indemnification		—		2		—			—			2

Balance, June 30, 2014	$	1,588	$	5,304	$	(1,639	)	$	2,445		$	7,698

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	656		$	672		$	1,648		$	1,567
Operating revenues from affiliates		—			—			1			—

Total operating revenues		656			672			1,649			1,567

Operating expenses
Purchased power and fuel		193			161			570			426
Purchased power from affiliate		48			97			135			238
Operating and maintenance		160			155			416			319
Operating and maintenance from affiliates		24			26			48			50
Depreciation and amortization		59			56			117			113
Taxes other than income		38			39			80			80

Total operating expenses		522			534			1,366			1,226

Operating income		134			138			283			341

Other income and (deductions)
Interest expense		(25	)		(25	)		(50	)		(51	)
Interest expense to affiliates, net		(3	)		(3	)		(6	)		(6	)
Other, net		1			—			3			3

Total other income and (deductions)		(27	)		(28	)		(53	)		(54	)

Income before income taxes		107			110			230			287
Income taxes		23			32			57			87

Net income		84			78			173			200
Preferred security dividends and redemption		—			6			—			7

Net income attributable to common shareholder		84			72			173			193

Comprehensive income	$	84		$	78		$	173		$	200

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2014			2013
Cash flows from operating activities
Net income	$	173		$	200
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		117			113
Deferred income taxes and amortization of investment tax credits		6			25
Other non-cash operating activities		50			50
Changes in assets and liabilities:
Accounts receivable		34			55
Receivables from and payables to affiliates, net		(21	)		(18	)
Inventories		22			27
Accounts payable, accrued expenses and other current liabilities		30			35
Income taxes		54			39
Pension and non-pension postretirement benefit contributions		(11	)		(10	)
Other assets and liabilities		(114	)		(49	)

Net cash flows provided by operating activities		340			467

Cash flows from investing activities
Capital expenditures		(308	)		(254	)
Changes in intercompany money pool		—			(263	)
Change in restricted cash		—			(1	)
Other investing activities		6			4

Net cash flows used in investing activities		(302	)		(514	)

Cash flows from financing activities
Dividends paid on common stock		(160	)		(166	)
Dividends paid on preferred securities		—			(1	)
Redemption of preferred securities		—			(93	)
Other financing activities		(2	)		1

Net cash flows used in financing activities		(162	)		(259	)

Decrease in cash and cash equivalents		(124	)		(306	)
Cash and cash equivalents at beginning of period		217			362

Cash and cash equivalents at end of period	$	93		$	56

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	93	$	217
Restricted cash and cash equivalents		2		2
Accounts receivable, net
Customer		304		360
Other		107		107
Inventories, net
Fossil fuel		34		60
Materials and supplies		25		21
Deferred income taxes		80		83
Prepaid utility taxes		78		3
Regulatory assets		29		17
Other		51		36

Total current assets		803		906

Property, plant and equipment, net		6,545		6,384
Deferred debits and other assets
Regulatory assets		1,495		1,448
Investments		23		23
Investments in affiliates		8		8
Receivable from affiliates		490		447
Prepaid pension asset		359		363
Other		38		38

Total deferred debits and other assets		2,413		2,327

Total assets	$	9,761	$	9,617

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Long-term debt due within one year	$	250	$	250
Accounts payable		298		285
Accrued expenses		167		106
Payables to affiliates		37		58
Customer deposits		50		49
Regulatory liabilities		88		106
Other		32		37

Total current liabilities		922		891

Long-term debt		1,947		1,947
Long-term debt to financing trusts		184		184
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		2,545		2,487
Asset retirement obligations		30		29
Non-pension postretirement benefits obligations		292		286
Regulatory liabilities		671		629
Other		92		99

Total deferred credits and other liabilities		3,630		3,530

Total liabilities		6,683		6,552

Commitments and contingencies
Shareholder’s equity
Common stock		2,415		2,415
Retained earnings		662		649
Accumulated other comprehensive income, net		1		1

Total shareholder’s equity		3,078		3,065

Total liabilities and shareholders’ equity	$	9,761	$	9,617

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income, net		Total Shareholder’s Equity
Balance, December 31, 2013	$	2,415	$	649		$	1	$	3,065
Net income		—		173			—		173
Common stock dividends		—		(160	)		—		(160	)

Balance, June 30, 2014	$	2,415	$	662		$	1	$	3,078

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	651		$	649		$	1,689		$	1,525
Operating revenues from affiliates		2			4			18			8

Total operating revenues		653			653			1,707			1,533

Operating expenses
Purchased power and fuel		183			189			592			501
Purchased power from affiliate		85			99			205			212
Operating and maintenance		163			139			326			266
Operating and maintenance from affiliates		25			21			50			37
Depreciation and amortization		89			82			197			175
Taxes other than income		53			54			113			109

Total operating expenses		598			584			1,483			1,300

Operating income		55			69			224			233

Other income and (deductions)
Interest expense		(23	)		(28	)		(47	)		(58	)
Interest expense to affiliates, net		(4	)		(4	)		(8	)		(8	)
Other, net		5			4			9			9

Total other income and (deductions)		(22	)		(28	)		(46	)		(57	)

Income before income taxes		33			41			178			176
Income taxes		14			16			72			70

Net income		19			25			106			106
Preference stock dividends		3			3			6			6

Net income attributable to common shareholder		16			22			100			100

Comprehensive income	$	19		$	25		$	106		$	106

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2014			2013
Cash flows from operating activities
Net income	$	106		$	106
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		197			175
Deferred income taxes and amortization of investment tax credits		47			98
Other non-cash operating activities		89			61
Changes in assets and liabilities:
Accounts receivable		44			(58	)
Receivables from and payables to affiliates, net		(12	)		(11	)
Inventories		—			4
Accounts payable, accrued expenses and other current liabilities		(74	)		(28	)
Counterparty collateral received, net		27			—
Income taxes		(14	)		(33	)
Pension and non-pension postretirement benefit contributions		(8	)		(11	)
Other assets and liabilities		8			63

Net cash flows provided by operating activities		410			366

Cash flows from investing activities
Capital expenditures		(313	)		(264	)
Change in restricted cash		(30	)		3
Other investing activities		11			4

Net cash flows used in investing activities		(332	)		(257	)

Cash flows from financing activities
Changes in short-term borrowings		(65	)		—
Issuance of long-term debt		—			300
Retirement of long-term debt		(35	)		(33	)
Dividends paid on preference stock		(6	)		(6	)
Other financing activities		12			(2	)

Net cash flows (used in) provided by financing activities		(94	)		259

Increase (decrease) in cash and cash equivalents		(16	)		368
Cash and cash equivalents at beginning of period		31			89

Cash and cash equivalents at end of period	$	15		$	457

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	15	$	31
Restricted cash and cash equivalents		58		28
Accounts receivable, net
Customer		419		480
Other		102		114
Income taxes receivable		44		30
Inventories, net
Gas held in storage		48		53
Materials and supplies		33		28
Deferred income taxes		11		2
Prepaid utility taxes		—		57
Regulatory assets		178		181
Other		8		7

Total current assets		916		1,011

Property, plant and equipment, net		6,030		5,864
Deferred debits and other assets
Regulatory assets		499		524
Investments		4		5
Investments in affiliates		8		8
Prepaid pension asset		396		423
Other		24		26

Total deferred debits and other assets		931		986

Total assets^(a)	$	7,877	$	7,861

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	70	$	135
Long-term debt due within one year		72		70
Accounts payable		205		270
Accrued expenses		95		111
Deferred income taxes		39		27
Payables to affiliates		55		55
Customer deposits		87		76
Regulatory liabilities		63		48
Other		61		35

Total current liabilities		747		827

Long-term debt		1,904		1,941
Long-term debt to financing trust		258		258
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		1,814		1,773
Asset retirement obligations		17		19
Non-pension postretirement benefits obligations		215		217
Regulatory liabilities		202		204
Other		65		67

Total deferred credits and other liabilities		2,313		2,280

Total liabilities^(a)		5,222		5,306

Commitments and contingencies
Shareholders’ equity
Common stock		1,360		1,360
Retained earnings		1,105		1,005

Total shareholder’s equity		2,465		2,365

Preference stock not subject to mandatory redemption		190		190

Total equity		2,655		2,555

Total liabilities and shareholders’ equity	$	7,877	$	7,861

(a)

BGE’s consolidated assets include $31 million and $31 million at June 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE that can only be used to settle the liabilities of the VIE. BGE’s consolidated liabilities include $234 million and $269 million at June 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE for which the VIE creditors do not have recourse to BGE. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Total Shareholders’ Equity			Preference stock not subject to mandatory redemption		Total Equity
Balance, December 31, 2013	$	1,360	$	1,005		$	2,365		$	190	$	2,555
Net income		—		106			106			—		106
Preference stock dividends		—		(6	)		(6	)		—		(6	)

Balance, June 30, 2014	$	1,360	$	1,105		$	2,465		$	190	$	2,655

See the Combined Notes to Consolidated Financial Statements

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data, unless otherwise noted)

1. Basis of Presentation (Exelon, Generation, ComEd, PECO and BGE)

Exelon is a utility services holding company engaged through its principal subsidiaries in the energy generation and energy distribution businesses. On April 1, 2014, Generation assumed the operating licenses and corresponding operational control of CENG’s nuclear fleet. As a result, Exelon and Generation consolidated CENG’s financial position and results of operations into their businesses. Prior to April 1, 2014, Exelon and Generation accounted for CENG as an equity method investment. Refer to Note 6 — Investment in CENG for further information regarding the integration transaction.

The energy generation business includes:

•

Generation: Physical delivery and marketing of owned and contracted electric generation capacity and provision of renewable and other energy-related products and services, and natural gas exploration and production activities. Generation has six reportable segments consisting of the Mid-Atlantic, Midwest, New England, New York, ERCOT and Other regions.

The energy delivery businesses include:

•

ComEd: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in northern Illinois, including the City of Chicago.

•

PECO: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in southeastern Pennsylvania, including the City of Philadelphia, and the purchase and regulated retail sale of natural gas and the provision of distribution services in the Pennsylvania counties surrounding the City of Philadelphia.

•

BGE: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in central Maryland, including the City of Baltimore, and the purchase and regulated retail sale of natural gas and the provision of distribution services in central Maryland, including the City of Baltimore.

Each of the Registrant’s Consolidated Financial Statements includes the accounts of its subsidiaries. All intercompany transactions have been eliminated.

Certain prior year amounts in the Exelon, Generation and BGE Consolidated Statement of Operations have been reclassified between line items for comparative purposes and correction of prior period classification errors identified in 2013. The reclassifications did not affect any of the Registrants’ net income or cash flows from operating activities. Exelon corrected the presentation of Purchased power and fuel from affiliates of $287 million and $605 million on its Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2013, respectively. Generation corrected the presentation of Purchased power and fuel from affiliates of $290 million and $611 million on its Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2013, respectively. Generation also corrected the presentation of Interest expense to affiliates, net of $16 million and $34 million on its Statement of Operations and Comprehensive Income for the three and six months ended June 30, 2013, respectively. BGE corrected its presentation of Interest expense to affiliates, net of $4 million and $8 million on the Statement of Operations and Comprehensive Income for the three and six months ended June 30, 2013, respectively.

The accompanying consolidated financial statements as of June 30, 2014 and 2013 and for the six months then ended are unaudited but, in the opinion of the management of each Registrant include all adjustments that are considered necessary for a fair statement of the Registrants’ respective financial statements in accordance with GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The December 31, 2013 Consolidated Balance Sheets were obtained from audited financial statements. Financial results for interim

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Dollars in millions, except per share data, unless otherwise noted)

periods are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, 2014. These Combined Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the Notes to Combined Consolidated Financial Statements of all Registrants included in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of their respective 2013 Form 10-K Reports.

2. New Accounting Pronouncements (Exelon, Generation, ComEd, PECO and BGE)

The following recently issued accounting standards were adopted by or are effective for the Registrants during 2014.

Presentation of Unrecognized Tax Benefits When Net Operating Loss Carryforwards, Similar Tax Losses or Tax Credit Carryforwards Exist

In July 2013, the FASB issued authoritative guidance requiring entities to present unrecognized tax benefits as a reduction

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